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HMRC internal manual

Venture Capital Schemes Manual

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EIS: deferral relief: shares issued before 6 April 1998: when is the deferred gain brought back into charge?

TCGA92/SCH5B/PARA3 (1)

The deferred gain or part of the deferred gain will be brought back into charge when there is a chargeable event. The following are chargeable events whenever they take place.

  1. A disposal, including a deemed disposal of the EIS shares by the investor except a disposal to their spouse or civil partner which is covered by the no gain/no loss rule in TCGA92/S58, see CG22200 onwards.
  2. A disposal of the EIS shares by a person who acquired them on a no gain/no loss transfer from their spouse or civil partner, the original investor. This does not apply to no gain/no loss disposals back to the same spouse or civil partner.
  3. The investor becomes non-resident within 5 years of the issue of the EIS shares, but see exceptions at VCM22080.
  4. The person who received the shares on a no gain/no loss transfer from their spouse or civil partner becomes non-resident within 5 years of the issue of the shares, but see exceptions at VCM22080.

Before 6 April 1998 there were two further chargeable events

  1. When the company ceased to be a qualifying company for EIS purposes within 3 years after the shares were issued or within 3 years from commencing trading if this were later.
  2. When the EIS income tax relief was withdrawn or reduced in circumstances to which (a) to (e) above did not apply.

FA98 introduced new TCGA92/SCH5B/PARA3 (1)(e) which replaces these with effect from 6 April 1998. There is a chargeable event when eligible shares cease to be eligible see VCM23060.